Reference no: EM131135533

GOODIEBOX BAKERY

"GoodieBox" is an "at home" bakery located in the town of Bloomsburg, Pennsylvania.

GoodieBox specializes in beautifully iced, mini cakes (personal size.) The bakery was started four years ago by Pat Taylor, a Bloomsburg University Business Management student. Pat started the bakery to earn a little extra cash for college expenses.

Pat's idea for the mini cake was not planned. In fact, Pat was planning to bake a birthday cake for one roommate, Terry, when the realization occurred that there were not enough ingredients to make a full-size cake. Rather than getting in the old beat up Honda Accord and running to Weis Markets for more ingredients, Pat decided to bake a "mini cake" for Terry. Using an empty coffee can as the cake pan, Pat whipped up the first "mini cake" Well, Terry loved the cake so much, and told all friends, who told all their friends, and, well, you can imagine how GoodieBox's mini cakes became a very popular item among the college cake-loving crowd!

For the past four years, Pat has been using the kitchen in the Bloomsburg apartment to bake scrumptious, beautifully iced, mini cakes. However, Pat recently graduated from Bloomsburg University and is now contemplating doing this as a full-time job, possibly opening up a "brick-and-mortar" business somewhere in the Bloomsburg area.

As a consultant to Pat, you need to help with this decision. To assist you, please read and then provide a response to the following questions

ACCOUNTING/FINANCE/OPERATIONS COMPONENT

Pat finds a location for GoodieBox. It's a corner property on Main Street that has been recently refurbished with an attractive store front and a modern kitchen in the rear. The property may be leased for $1,500 each month; utilities are included. Considering experience with GoodieBox, Pat believes that a mini cake will sell for $8.00 and each cake costs approximately $3.00 to make.

1. How many mini cakes must Pat sell each month to "break even" assuming that the only fixed cost for GoodieBox is the monthly lease amount? Please refer to pages 203 and 204 in text.

2. On the second floor of the corner property, there is a small apartment where Pat may live for only $250 month, utilities included, with the stipulation that GoodieBox leases the first floor. How many cakes must Pat sell each month to cover business and living costs? (Hint: In your calculation, consider the $250 as an additional fixed cost)

3. As a full-time student, Pat was able to sell approximately 50 cakes each month through the apartment-based, word-of-month operation. Based on your responses above, list the factors Pat should consider in the evaluation of the reasonableness of selling the amount of cakes from your answer to #2 above each month.

4. List at least five fixed and variable costs that you, as a consultant, recommend Pat investigate.

5. List at least three sources of financing Pat should consider, and the advantages/disadvantages of each.

INTERRELATIONSHIP OF BUSINESS AREAS COMPONENT

Pat decided to hire a full-time employee who happens to be a relative. Describe at least two ways that this decision will affect the following areas within GoodieBox. Since change impacts all areas of a business, be sure your response is consistent among all areas.

• Accounting
• Finance
• Operations
• Ethics
• Marketing
• Technology
• Management

As Pat's business consultant, what is your recommendation to Pat whether to pursue this as a full-time job and open a "brick-and-mortar" business in Bloomsburg? Explain your response.